As seen on LinkedIn Talent Blog May 4, 2016.
If you are a recruiting leader who has had doubts about the need for measuring your firm’s quality of hire or if you have had difficulty building a business case to convince others of its economic value, this is the article for you. Rather than spending a lot of time talking about the measure itself, the exclusive focus of this article is on listing and explaining the many benefits that occur when you measure quality of hire.
After you scan through the long list of benefits, I’m sure you’ll agree that this statement is literally true, “Measuring the quality of hire is the most strategic action you can take in corporate recruiting.” By the way, if you don’t know what quality of hire is, it is a dual measure of both the on-the-job performance and the retention rate of new hires. Rather than using the term quality of hire, I prefer the less confusing phrase “the on-the-job performance of new hires” but I will use both in this article.
1. Boosts the overall productivity of the team:
The goal of every manager is to continually improve the productivity of their team. As mentioned previously, the prime component of the quality of hire measure is the “on-the-job performance” of new hires. So using quality of hire data to improve the hiring process will result in each new hire performing a certain percentage better. And if that percentage of improvement is say 10%, you are guaranteed that the overall performance of the team will steadily improve as additional better performing new hires are added to the team.
In jobs like sales, the new hire output is already measured and quantified in dollars. It is easy for hiring managers to see and appreciate the revenue dollars that are added to the bottom line as a result of the improved sales hiring process.
2. Increases revenue generation:
Increasing revenue is the #1 goal in most corporations, so it makes sense to improve quality of hire in jobs that directly increase revenue. Those jobs are known as revenue-generating jobs (like those in sales, collections and investments) because they directly and measurably increase corporate revenue. It makes sense for recruiting to prioritize these revenue-generating jobs and to use quality of hire data to identify and hire individuals that can produce more output. Reducing the “time to fill” and the number of vacant positions in these jobs will also increase revenue because obviously no revenue can be generated during each day that one of these positions is vacant.
3. Improves your candidate selection criteria:
If you use the wrong selection criteria, you will end up hiring a good number of weak performers. So by comparing the selection factors (i.e. education level, years of experience, skills etc.) that top-performing hires have and that average or below average hires don’t have, you can determine which selection factors predict on-the-job success.
Validating and then refining those selection factors using quality of hire data allows recruiters to convince hiring managers to drop the excess requirements or superfluous factors that they often insist on. And then emphasize the ones that really predict. Refining the selection factors and then hiring individuals with a more appropriate skill set will over time further increase the on-the-job performance of your hires.
4. Allows you to pinpoint your best sources of hire:
Once you know which individual new hires are the top and weak performers, you can backtrack to identify which individual sources produced the most quality hires and weak hires. Refining those sources allows recruiters to focus on the best sources for that job. And obviously, an increased usage of the most effective sources will lead to a direct increase in the on-the-job performance of your new hires.
5. Reduces the number of “hiring failures”:
Hiring managers literally hate having a single new hire fail because these weak new hires totally disrupt the team. Fortunately, only a small percentage of new hires turn out to be “hiring failures” that must be released. And because quality of hire data also covers weak performers, you can use it to identify the factors or traits that can predict new hire failure in an applicant.
In addition, because you have on-the-job performance data, you can use that data to support any needed discipline or termination. By more accurately identifying and screening out likely “hiring failures” among applicants you will have fewer new hire failures, an increase in overall productivity and improved hiring manager satisfaction as a result of not having to deal with many failed hires. Obviously, having fewer hiring failures will also make recruiters happy because they won’t have to conduct as many “replacement searches”.
6. Improves offer acceptance rates:
Because quality of hire data identifies who are your top performers among new hires, this provides recruiters with an opportunity to survey these top performers in order to identify their unique “job acceptance criteria.” Once you know what factors cause a top performer to accept or reject an offer, you can then refine your offer process to ensure that it covers each of those factors. A higher offer acceptance rate means that you will hire more of your “first choice candidates,” and that will over time increase your overall productivity.
7. Increases your competitiveness in the talent marketplace:
With the use of quality of hire data, the effectiveness of your hiring process will improve over time. You also precisely know which selection factors predict success. And as a result, everyone will treat recruits that meet those requirements better and that will build their confidence so that they won’t drop out of the process prematurely. And as a result of this process refinement, your firm will win more “head-to-head” recruiting competitions with your competitors. And that will make hiring managers happy while at the same time improve your overall quality of hire. Obviously, as you hire a larger number of top performers, they will act as a “magnet” to attract even more top performers.
8. Give you the ability to hire faster:
Once you know which new hires excel at performance, you can then examine their hiring record to determine the average number of days it took to hire them. If you find an inverse correlation (i.e. the best are hired in fewer days), you can use that information to convince hiring managers and recruiting leaders that making fast hiring decisions (within 10 days) is essential if you expect to hire “in-demand” candidates.
9. Increases salary savings:
It is quite possible that individual recruiters are getting you high-performing hires, but they’re doing it by offering unnecessarily high compensation packages. Once you know who the top performers are, you can determine if there is a correlation between high initial compensation and on-the-job performance. If you find that some mediocre performers are receiving high pay, recruiting leaders can work with the recruiters and compensation professionals to more accurately determine which candidates will likely actually earn their increased compensation.
By interviewing a sample of top performers, recruiting can find out if in fact the compensation was a major part of the decision to say yes. Taken together this may result in lower overall compensation costs while maintaining the same higher quality across all jobs.
10. Helps you identify weak hiring managers:
Research demonstrates that the hiring assessment accuracy of hiring managers varies from between 80% and 20%. So if a manager has enough hires, quality of hire data can be used to determine if an individual manager is performing at the lower end of this range.
Recruiters can then work with and coach the poor performing hiring managers to improve their hiring approach. Identifying the errors made by many different hiring managers may result in the identification of tips and problems that can be applied to the education of all new hiring managers. And over time, fixing this weak hiring manager problem may result in higher performing hires throughout the organization.
11. Helps you hone in more easily on candidates with highly desirable traits like leadership or innovation:
Many organizations are short on leaders or innovators, so they include the fact that a new hire is currently performing as a leader/innovator as one of their quality of hire measures. In those cases, quality of hire data can be used to determine what factors during the screening process indicate that a candidate is a leader/innovator or potential leader/innovator.
If you continue to track these hires over time, you can use the initial quality of hire data to accurately predict the “trajectory” or the future growth of a newly hired leader/innovator. Obviously, refining your screening process to better identify and hire better-performing hires will have a dramatic impact on company and team performance.
12. Improves the performance of struggling new hires:
In many organizations, you have to wait for the completion of a formal performance appraisal to identify new hires that are having difficulty. However, if you collect on-the-job performance data early enough as part of your quality of hire program (i.e. at 3 or 6 months) the manager can use that data for the early identification of struggling new hires that need help. The continuous use of performance data can also tell the manager if the coaching or training that was provided had a positive impact.
13. Reduces new hire turnover:
Managers dislike investing in training, coaching and development time for new hires, only to see them leave prematurely. Because one of the primary measures of quality of hire is the retention rate of new hires, there is a built-in feedback loop that notifies recruiters when a recent new hire prematurely quits. That alert allows the recruiter of the new hire to use exit interview information to determine why the employee quit. If any of “reasons for leaving” factors relate to things that can be assessed during the hiring process, (like the recruiter oversold and exaggerated the job) the screening process can be refined. And over time, the number of early turnovers will be reduced.